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China Plans to Revive Incentives to Boost Slumping Auto Sales

Payments Will Encourage Car Owners to Scrap Older Cars and Buy New Ones

Published on May 29, 2012.

China's cabinet agreed to revive financial incentives for consumers to trade in their passenger cars to help increase demand in the world's biggest vehicle market, a government official said.

The cabinet approved the plan last week and relevant ministries are working on details, such as the types of vehicles covered and amount of state funding, according to the official, who asked not to be identified because the matter hasn't been made public.

The government also is conducting feasibility studies on incentives for new-car buyers in rural areas, the official said.

Government officials are under mounting pressure to revive consumer demand after the economy grew slower than forecast and vehicle sales slumped. In 2009, China introduced scrappage incentives to counter the global financial crisis, spurring $7.8 billion in new-car purchases the following year. Since then, the payments for trading in an old car in order to buy a new one have ended.

China's total vehicle sales declined 1.3% in the January-to-April 2012 period, the worst showing since 1998 when deliveries fell 1.6 %, according to data compiled by the China Association of Automobile Manufacturers.

Reuters reported earlier that the government soon will provide subsidies to rural residents who trade in used vehicles for fuel-efficient new ones.